Native American borrowers using a federal loan program designed to expand access to homeownership are now paying a higher upfront fee after the Department of Housing and Urban Development reversed a reduction made three years ago.
HUD increased the upfront loan guarantee fee for its Section 184 Indian Housing Loan Guarantee Program from 1% to 1.5% for new firm commitments issued on or after Oct. 1, including refinances. The annual guarantee fee remains at zero.
The higher fee is tied to the date HUD issues the firm commitment — not when the borrower applied, received a case number, or closes the loan.
The increase adds $500 for every $100,000 borrowed. On a $300,000 loan, for example, the upfront fee rises from $3,000 to $4,500.
HUD permits borrowers to finance the upfront guarantee fee rather than pay it entirely at closing, but doing so increases the loan balance.
The change arrived with little runway for lenders. HUD published the fee increase in the Federal Register on Sept. 28, just days before its Oct. 1 effective date.
HUD Reverses A 2023 Fee Reduction
The increase puts the Section 184 upfront fee back where it stood before HUD lowered borrower costs in 2023.
Effective July 1 of that year, HUD cut the upfront guarantee fee from 1.5% to 1% and eliminated the program's 0.25% annual guarantee fee.
At the time, HUD said the reductions were intended to make homeownership more affordable and could help more borrowers qualify.
NMP reported on the change that year as part of a broader look at efforts to expand mortgage access in Native American communities.
HUD is now restoring the 1.5% upfront fee while leaving the annual charge at zero.
The reason isn't deteriorating loan performance.
HUD said Section 184 has maintained a lifetime default rate of approximately 3.5%, which it attributed to lender underwriting and servicing as well as housing counseling and support provided by tribes.
Instead, HUD said the higher fee will allow the program to become self-sustaining and operate without relying on annual congressional appropriations.
"The Section 184 program's strong performance and low default rate enables HUD to remove the need for annual appropriations through a modest fee increase," the department said in its Federal Register notice.
That effectively shifts more of the program's funding burden to the borrowers using it, even as HUD points to its strong performance as the reason it can make that transition.
A Specialized Program With A Specific LO Impact
Section 184 is not a mass-market loan program, but the change matters for lenders and originators operating in Native American communities.
The program provides a federal loan guarantee for eligible American Indian and Alaska Native borrowers, tribes, and tribally designated housing entities. Loans can be used for purchases, construction, rehabilitation, and refinancing in eligible areas.
More than 170 lenders were approved to participate in Section 184 when NMP examined lending challenges in Native American communities in 2024.
That reporting also highlighted how difficult mortgage lending can already be on tribal trust lands, where land ownership, leases, title records, and federal processes can make transactions more complicated than conventional home lending.
The impact isn't evenly distributed across the country. Recent origination data show Oklahoma is by far the largest market for Section 184 purchase loans, followed by Washington, Alaska, Arizona, and California.
The program's footprint has also been expanding. In June, HUD added 356 counties and cities across six states to Section 184's eligible areas and made Alabama, Georgia, Maryland, New York, and Virginia fully eligible.
The latest fee change gives originators another item to account for when working with Section 184 borrowers.
Loans that received a firm commitment before Oct. 1 are not subject to the increase. Existing guaranteed loans also are unaffected.
But a loan that was already in an originator's pipeline without a firm commitment by the cutoff falls under the new 1.5% fee.
Eric Bernstein, president and co-founder of LendFriend Mortgage, said the firm-commitment cutoff is the part originators need to watch most closely because loans already in the pipeline without a commitment by Oct. 1 are subject to the higher fee regardless of when the application started.
“Financing that fee instead of paying it at closing also quietly raises both the loan balance and the monthly payment, so that conversation needs to happen early,” Bernstein said.
That means lenders should check Section 184 pipelines against the firm-commitment date and make sure the higher fee is reflected in loan calculations, borrower conversations, and applicable disclosures.
Skilled Workers Program Gets A Fee, Too
HUD also changed the fee for loans made through the Section 184 Skilled Workers Demonstration Program.
New firm commitments issued under that program on or after Oct. 1 carry a 1% upfront guarantee fee, up from zero.
Annual guarantee fees remain at zero for both programs.
For the broader Section 184 program, the Oct. 1 increase effectively unwinds one piece of HUD's 2023 affordability initiative while preserving another: borrowers once again face the 1.5% upfront charge, but they still avoid the annual fee that existed before the earlier reduction.
For originators, the immediate issue is simpler. Any Section 184 loan without a firm commitment before Oct. 1 needs to be priced and discussed with the borrower under the new fee structure.
